2/12/08

Economics

fiscal profligacy (Government spending as a percent of GDP is too high and the looming explosion in entitlement expenditures will make it worse. There is no good solution save spending discipline.) W’s spending legacy:

http://www.captainsjournal.com/2008/02/10/al-qaeda-diary-catalogs-organizations-decline/

protectionism (Free trade is a major positive for world and US economic growth.).

http://mjperry.blogspot.com/2008/02/in-currency-of-time-good-old-days-are.html

Politics

Domestic

The latest on immigration enforcement:

http://michellemalkin.com/2008/02/11/how-to-clear-an-immigration-backlog-skip-the-background-checks/

International War Against Radical Islam

Iraq is not the worry:

http://article.nationalreview.com/?q=OThkYTMwN2UwNDlmNjdlZjRkNjcwZDRhNDBmY2QxZmU=

The Market

Technical

Fundamental

We got another piece of bad news from the financial sector yesterday--American International Group announced that its auditors had found deficiencies in its investment portfolio that had resulted from sub prime related difficulties; and while there was some damage among the financials, stock prices were generally up. The point, at the risk of being repetitive, is that as investors continue to gain clarity regarding the magnitude of this problem, they appear to be increasingly limiting those stocks that are penalized to the offenders rather than the entire Market.

More news on the monoline insurers:

http://www.bloggingstocks.com/2008/02/12/warren-buffett-offers-to-reinsure-800-billion-in-municipal-bond/

The High Yield Buy List

Company Close 2/11 Buy Value Range

AJ Gallagher 23.80 23-26

Martin Midstream Ptrs 34.59 35-40

Rayonier 41.70 39-45

Reynolds American 65.39 61-70

Subscriber Alert

The stock price of Alliance Resource Ptrs (ARLP-$39) has risen above the upper boundary of its Buy Value Range. Accordingly, it is being Removed from the High Yield Buy List. The High Yield Portfolio will continue to hold ARLP.

The stock price of SAP (SAP-$48) is once again trading inside its Buy Value Range. Therefore, it is being re-Added to the Aggressive Growth Buy List. This morning at the Market open, the Aggressive Growth Portfolio will Buy an additional 1/5 position in SAP.

Company Highlight

United Technologies is an industrial conglomerate which manufacturers and services aircraft engines (Pratt & Whitney), manufacturers heating, ventilating and air conditioning equipment (Carrier), manufacturers and services elevators (Otis), builds helicopters (Sikorsky) and manufacturers electronic controls (Hamilton Sundstrand). The company has earned over a 20% return on equity over the last five years while growing profits and dividends at a 15%+ rate. UTX is on pace to continue this growth as a result of:

(1) the need by airlines to upgrade and expand their fleets,

(2) the necessity to repair, overhaul and replace the US severely depleted stock of military equipment,

(3) the impact of the worldwide construction boom on Otis elevators.

UTX is rated A++ by Value Line, its balance sheet carries a debt/equity ratio of 27% and its stock yields 1.8%.

http://finance.yahoo.com/q?s=UTX

News on Stocks in Our Portfolios

3M (Dividend Growth Portfolio) raised its quarterly dividend per share from $.48 to $.50.

http://finance.yahoo.com/q?s=MMM

LCA-Vision (High Yield Portfolio) reported fourth quarter and full year earnings per share of $.22 and $1.64 respectively versus $.27 and $1.34 in the comparable 2006 periods. The company also noted that it was experiencing a slowdown in revenue growth; and investors took the stock out behind the barn and beat it like a rented mule. However, like the CME incident last week, LCAV closed ($14.20) only slightly below the lower boundary of its Buy Value Range ($15) and well above its Stop Loss Price ($12.75). Given the high yield (6.8%) that the stock provides and the lack of any clear threat to its dividend, I am going to at least wait to see how the stock trades today before taking any action--unless of course it trades down near its Stop Loss Price.

http://finance.yahoo.com/q?s=LCAV

Ecolab (Aggressive Growth Portfolio) reported fourth quarter and full year operating earnings per share of $.40 and $1.66 respectively versus $.34 and $1.43 recorded in the similar 2006 periods.

http://finance.yahoo.com/q?s=ECL

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